Question: a. Auto-Parts Ltd manufactures car parts, and management is considering an expansion of its existing operations at the cost of $600 000. It expects this expansion to generate additional cash inflows for the next 10 years as follows: $$100 000 per annum in Years 1 5 and 130 000 per annum in Year 6 Year 10. The companys analyst has made the following estimates: i) The systematic risk of the companys assets is 0.75 ii) The risk-free interest rate is 11 per cent p.a. iii) The expected rate of return on the market portfolio is 15 per cent p.a. Assuming that, there is no company income tax, should the company undertake the expansion? Show all the working steps of all the calculations leading to your conclusion. b. Transfix Ltd has acquired a loan to finance a new earth moving machine at an interest rate of 7% per annum. The annuity consists of six cash flows of $5 000 payable annually. Calculate the value of the annuity today if the first cash flow is to be paid in four years time.